GEA Group AG (G1A)
Q2 2010 Earnings Call
July 30, 2010 12:00 PM ET
Donat Muller – Investor Relations
Dr. Helmut Schmale – Chief Financial Officer
Jürgen Siebrecht – HSBC
Tobias Loskamp – Kepler Capital Markets
Sven Weier – UBS
Markus Turnwald – DZ Bank
Alexis Denaud – Exane BNP Paribas
Chris Youl – MainFirst Bank
Christian Cohrs – Macquarie
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Yeah. Good afternoon. This is Donat Muller from GEA Investor Relations. Welcome to our Second Quarter Conference Call. Let me hand over directly to our CFO, Dr. Helmut Schmale, who will present the results.
Thank you, Donat. I’d like to welcome you as well to our today’s call. As an introduction, you’ll find on slide number two the main key messages about our quarter two. Just let me highlight one important thing. We saw a significant sequential upturn in order intake aided by both by continuous momentum with small orders, as well as, the return of large orders which we were still missing in quarter one 2010.
Slide three, on slide three, you will find the agenda with key figures performance and outlook. And I would like directly to turn then to slide number four, which reports to you the main key figures of the second quarter.
Let’s first talk about order intake. New orders amounted to €1,167 million in quarter two. This represents a sequential increase of about 16% and also the highest order intake since the quarter three 2009, the beginning of the global economic crisis. It appears that the momentum in large orders is continuing. In early July, our Process Engineering segment was awarded an order in excess of €30 million for dairy processing plant. The cumulative order intake for the first half year stands at €2,178 million, which is 3% above the corresponding figure for the previous year.
Sales, at €1,065 million the second quarter sales reflect a remarkable increase of 14% quarter-on-quarter and remained only about 4% below those of quarter two 2009. With order intake returning sales will also start picking up though with a delay.
EBIT before restructuring expenses, helped by the strong performance in quarter two 2010 the EBITDA amount to €176 million for the first half of 2010, slightly exceeding the prior year’s figure. The EBITDA margin was at 9.2% in quarter two, up by 59 basis points over that of the prior year and at 8.8%, up 73 basis points for the first half of 2010.
Because of higher depreciation charges from increased CapEx in recent years, however, the EBIT before restructuring expenses trailed the prior year’s figures by 2%. Nevertheless, the EBIT margin of the first half year 2010 increased by 31 basis points year-on-year to 6.2%.
As for the quarter two selectively EBIT and the EBIT margins are slightly up compared to those of the prior year, except for tiny profit of €41,000 there has been no material impact on the result from discontinued operations during the first half of 2010.
On page five, you will find details on the order intake for the quarter one 2010. Whereas in quarter one 2010 sequential organic development was negative. We achieved sound organic sequential growth of about 12% or €118 million in quarter two 2010. Year-on-year comparison, however shows organic growth of order intake for the first half year was almost flat. The reason for that is that order saw the trough only in quarter three 2009 before rebounding to old levels in quarter two 2010.
The reported order intake for the year-to-date was supported by a favorable currency development in the volume of €51 million in the first half of the year 2010 from various currencies. And a structural change mainly from the acquisition of the Wilaard Group that was the structural state in total was about €24 million.
On the next slide, you will find the regional order intake trend and the trend for GEA did not change during the second quarter. All regions displayed the same or slightly higher levels of business activity compared to previous quarter. Let me quickly comment on the development of the most important regions. Asia, recently the Asian Development Bank has raised the growth expectations for Asia in 2010 to 8.1%. For China, an overall growth of close to 10% is expected.
China today is the most important export destination for the mechanical engineering industry according to the German Association of Mechanical Engineering Producers. Hence its future demand will significantly influence further growth opportunities. Recently, the Chinese government again suspended preparations to float a currency in order to support the export competitiveness with a cheaper currency as the need may be.
Europe, the outlook for European development remains varied. Germany is seen as one of the growth drivers with expected 2010 gross national product growth of about 2%. The European Central Bank predicts average growth for the euro zone of about 1%.
North America, although growth in the U.S. continues, there are some concerns about short-term development. The production growth has slowed and the consumer index has hit the lowest level since autumn 2009. Hence the growth expectation for the second half of 2010 was recently reduced by some experts even a majority expects no severe double dip recession.
Already in Q1 we could observe recovery of the so-called base orders, meaning those with a volume below €5 million. This trend continued during the second quarter. In addition to those in quarter one, we received a couple of quite large orders in quarter two, specifically from the food and power industries after a temporary absence of large orders in quarter one. This is also a trend likely to continue as described. We have just booked a large order for quarter three at the beginning of July.